In a public auction in the UK five telecom companies paid £22 billion for five telecommunications licences. They claimed VAT included in that sum. HMRC refused the claim. Another case heard at the same time concerned a similar claim in Austria.
The appeal was referred to the European Court of Justice to decide whether the allocation by a Member State by way of auction of the rights in issue was an economic activity within Article 4(2) of the Sixth Directive.
The European Court of Justice said that the issuing of the licences by auction were an 'exploitation of … property' within Article 4(2) and not an economic activity. The licence was a necessary precondition for the claimants to the mobile telecommunications market and constituted control and regulation rather than participation in the market. Thus the issuing of the licences did fall within the scope of the Sixth...
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